Insolvent Club

Insolvent Club

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I am preparing accounts for a club that is insolvent. It is not a ltd co or Friendly society member and not an audit. In my view the club can not trade out of it's position and it is a matter of time before one of the creditors forces recovery action - which will probably be sale of the company's premises. I am of a mind to adapt my accountant's report to include mention of my fears over going concern. I do not feel I am over-reacting but would welcome your views and maybe some suggestions as to how much I ought to say in my report?

R H

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By neileg
19th May 2008 11:55

Different view
Can't help but agree with you David. Well put.

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David Winch
By David Winch
17th May 2008 13:08

A different view?

I do think that a well worded management letter to the committee is a good idea.

However I think a reference to your concerns should also be made in your report on the accounts. Surely it is the comment in the report on the accounts which will be seen by members of the club - the management letter will only be seen by the committee.

But before doing that do ask yourself what exactly you mean to say. Your original posting refers to the club being "insolvent" and also to your "fears over going concern", and also suggests that the club owns the property which it uses. Would sale of the property realise sufficient to pay off all the club's creditors? If so, is the club insolvent in the sense of "trading whilst insolvent"?

Or is it simply the case that at some stage the club's cash flow will become so poor that it will be unable to continue to obtain the supplies it needs and pay the wages and PAYE to keep trading?

If the club is obtaining goods and services on credit for which there is no reasonable prospect of it ever being able to pay then that could be dishonest and you also need to consider a report under PoCA 2002 / MLR 2007.

David

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By neileg
14th May 2008 17:00

First duty?
Is your first duty not to report your concerns to the members?

In any event, if the balance sheet clearly shows that the club is insolvent, are you adding anything by amending your accountants report? I would have though a well worded managemnt letter would be a better approach.

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By rehtg
15th May 2008 16:21

Thanks Neil,
My concerns have been made known to the committee for some time but without much adherance to my suggestions, but a formal letter is a good idea. Thanks.

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